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Monday, June 29, 2009

The biggest Ponzi scheme of all time

There’s lots of stuff being published about Madoff and how his Ponzi scheme was the biggest of all time. He might have burnt through 20 Billion, some say 50 Billion, whatever, it's a big number.

Compared with the UK Government, Madoff hadn’t got past page one of the Idiots Guide to Ponzi schemes. He was an amateur, not even worth a footnote in the history of Ponzis.

The article in the Sunday Times by Dominic Lawson spells out the unbelievable mess the UK is in because of the ageing population and the unwillingness of the Government to have done anything about its consequences other than make matters a hell of lot worse.

Mr Lawson quotes a European Commission report, about The Sustainability of Public Finances, dated 2006 (yes 2006) that said:
The United Kingdom has been placed in excessive deficit procedure and the European Council has recommended that the United Kingdom bring the deficit below 3 % of GDP by the financial year 2006/07 at the latest.

As a result of the weak fiscal position in recent years, the debt/GDP ratio has risen by around 5 % of GDP in three years, to 42.8 % of GDP in 2005 (42 % for the financial year 2005/06).
Do you know what the debt/GDP ratio is now? Come on have a guess. You won’t believe it? Trust me it is a big, big number. OK, double the figure in 2005 and add a bit (87%).

Lawson goes on to say that the IMF says that the
Fiscal headache of the credit crunch is as nothing to the migraine which, absent a change in policies, is about to pulverise us: it states that in the period between now (yes, that is 2009) and the middle of the century, the fiscal impact of the credit crunch will be about a tenth of that caused by the demographic crunch.
Let me spell this out for you. The Ponzi scheme we have been living through over the past couple of decades, but especially since the mid 1990s, has been paying Jo Public a ridiculously large amount compared with the money contributed.

Everybody has been living in Alice in Wonderland. The Government was able to position itself as the wise investor and manager of the nation’s wealth and Jo Public has done pretty well with zillions of new jobs created in the Public Sector and a continuous stream of initiatives, interventions, and policies to make everybody feel happy.

It was all a sham. Just as the credit crunch caused Madoff's scheme to collapsed so it has with UK New Labour Ltd. The scheme is collapsing in front of our eyes and guess who is going to pick up the tab. Jo Public, Jo Public’s kids and their kids. What a mess.

Marketers need to start preparing for how the will exist and thrive in a low growth, austere economy. Better start today. Dick Stroud

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